From the Foreword to the first issue: “Among the responsibilities of the International Monetary Fund, as set forth in the Articles of Agreement, is the obligation to ‘act as a center for the collection and exchange of information on monetary and financial problems,’ and thereby to facilitate ‘the preparation of studies designed to assist members in developing policies which further the purposes of the Fund.’ The publications of the Fund are one way in which this responsibility is discharged. “Through the publication of Staff Papers, the Fund is making available some of the work of members of its staff. The Fund believes that these papers will be found helpful by government officials, by professional economists, and by others concerned with monetary and financial problems. Much of what is now presented is quite provisional. On some international monetary problems, final and definitive views are scarcely to be expected in the near future, and several alternative, or even conflicting, approaches may profitably be explored. The views presented in these papers are not, therefore, to be interpreted as necessarily indicating the position of the Executive Board or of the officials of the Fund.” The authors of the papers in this issue have received considerable assistance from their colleagues on the staff of the Fund. This general statement of indebtedness may be accepted in place of a detailed list of acknowledgments. Subscription: US$6.00 a volume or the approximate equivalent in the currencies of most countries. Three numbers constitute a volume. Single copies may be purchased at $2.50. Special rate to university libraries, faculty members, and students: $3.00 a volume; $1.00 a single copy. Subscriptions and orders should be sent to: THE SECRETARY International Monetary Fund 19th and H Streets, N.W. Washington, D. C. 20431

Abstract

From the Foreword to the first issue: “Among the responsibilities of the International Monetary Fund, as set forth in the Articles of Agreement, is the obligation to ‘act as a center for the collection and exchange of information on monetary and financial problems,’ and thereby to facilitate ‘the preparation of studies designed to assist members in developing policies which further the purposes of the Fund.’ The publications of the Fund are one way in which this responsibility is discharged. “Through the publication of Staff Papers, the Fund is making available some of the work of members of its staff. The Fund believes that these papers will be found helpful by government officials, by professional economists, and by others concerned with monetary and financial problems. Much of what is now presented is quite provisional. On some international monetary problems, final and definitive views are scarcely to be expected in the near future, and several alternative, or even conflicting, approaches may profitably be explored. The views presented in these papers are not, therefore, to be interpreted as necessarily indicating the position of the Executive Board or of the officials of the Fund.” The authors of the papers in this issue have received considerable assistance from their colleagues on the staff of the Fund. This general statement of indebtedness may be accepted in place of a detailed list of acknowledgments. Subscription: US$6.00 a volume or the approximate equivalent in the currencies of most countries. Three numbers constitute a volume. Single copies may be purchased at $2.50. Special rate to university libraries, faculty members, and students: $3.00 a volume; $1.00 a single copy. Subscriptions and orders should be sent to: THE SECRETARY International Monetary Fund 19th and H Streets, N.W. Washington, D. C. 20431

A global aggregation of balance of payments statistics serves to shed light both on the reliability and international comparability of the reported statements and on the structure of world payments. Some observations on the first of these aspects are contained in a previous study,1 and the additional statistics now available suggest no important modifications to them. On the other hand, certain facts about the world payments structure appear to be showing up more clearly and to be receiving confirmation as the series of data that has been compiled is extended to cover more years. This paper draws attention to some of these structural features. The statistical discrepancies revealed by the “world summary” approach, together with the conclusion based on supplementary exercises in disaggregation and direct intercountry comparisons that the summaries tend to mask substantial compensating errors, make it unwise to read too much into what may seem to be slight tendencies over the period. Nevertheless, the evidence on at least a few points seems quite unmistakable, and these points are discussed below.

(1) The gross volume of international transactions in goods and services grew noticeably faster from 1961 to 1966 than the volume of domestic transactions, as measured by such indicators as gross national product. Goods and services separately rose at rather similar rates.

(2) For many categories of capital transaction, the gross volume of turnover is not of much analytic interest, and the balance of payments does not seek to record capital movements on a fully gross basis. However, the net flows, country by country, of the main types of capital distinguished in the balance of payments increased considerably in the period 1961–66, although this increase was probably not more than about two thirds as large, on the average, as the growth in gross transactions in goods and services.

(3) The gross volume of transactions among developed countries appears to be at least three or four times as large as the transactions of these countries with the less developed countries. On the other hand, such evidence as is available indicates that transactions among less developed countries could hardly amount to as much as one fourth of their total transactions, and it is possible that the proportion was actually much smaller than this.

(4) The similarities between the broad structure of the transactions of the developed countries with each other and of their transactions with the less developed countries are more striking than the differences. Moreover, this structure remained virtually unchanged from the beginning to the end of the period. The only notable difference in pattern between the transactions of the two groups is that, as might be expected, service receipts play a smaller role, and transfer payments and capital inflows a larger one, among the credit entries for the less developed than for the developed countries. (See Part 1 of Table 4.)

(5) The available data do not suggest that there was any great disparity between the rate of growth of transactions among developed countries and their transactions with less developed countries. In fact, Part 2 of Table 4 by chance shows identical percentage increases for both groups over the five-year period.

(6) For goods, services, and transfer payments, the large increase in gross flows over the period was not accompanied by any indication of an increase in net deficit of the less developed countries with the developed countries on these categories of transaction. For capital transactions other than monetary movements, the net flow from the developed to the less developed countries increased substantially from the beginning to the end of the period. During the latter part of the period, the net capital flow came to exceed the current account imbalance, so that less developed countries were able to add to their reserves.

I. Magnitude of International Transactions

Although the statistics for world aggregates of basic economic series are far from precise, international transactions undoubtedly increased at a much faster rate than most kinds of domestic activity during the period surveyed. (See Table 1.) The following tabulation compares the increase from 1961 to 1966 in intercountry transactions, based on the figures in this paper, and in various categories of domestic activity, as derived from the United Nations’ Statistical Yearbook; all figures exclude the CMEA countries, mainland China, etc., and are expressed as percentage increases.

article image

This comparison overstates the growth in international receipts relative to the other factors, since the former are not deflated for price increases. However, the UN index of export prices suggests that the prices for merchandise trade, which accounts for some 60 per cent of international transactions, rose by only about 5 per cent from 1961 to 1966.

The increase in international payments proceeded rather evenly from year to year within the period, as the following figures show:

article image

Only the increase in the first year, from 1961 to 1962, is notably different from the pattern of the rest of the period. The closely parallel development in the two groups of countries leading to identical increases of 54 per cent over the five years is also interesting, although the underlying reasons for it are not ascertainable from the available data. The great majority of transactions of the developed countries (probably at least 75 or 80 per cent) are with other developed countries, while a similar proportion of those of the less developed countries are with the developed countries. From this it might be inferred either that both groups have been equally responsive to certain underlying influences affecting the world economy or that the developed countries set the pace but the effect of their actions has tended to be spread rather evenly over their partners in both groups.

A breakdown of the over-all increase in international transactions by balance of payments category and country group is given in Table 4, Part 2. Because of the deficiencies in the reported data, small differences in the percentages cannot be regarded as significant. The breakdown of the transactions of the developed countries between those with other developed countries and those with less developed countries is especially crude, since the estimating method used (see Note to Table 4) assumes in effect no change in the pattern of the transactions of the less developed countries with each other. The trade statistics show that about 25 per cent of the merchandise transactions of the less developed countries in 1961 were with other less developed countries, and that this trade had increased by some 35 per cent (much more slowly than trade with the developed countries) by 1966. If the figures were to be adjusted for trade among less developed countries, the increases under the merchandise column in Part 2 of Table 4 would be reduced at most by only 1 or 2 percentage points for trade between developed countries and raised by the same proportion for trade of the developed with the less developed countries. The differences between the rates of increase in trade between the various groups may thus have been, if anything, slightly less than the table indicates. The conclusions to be drawn from the figures are that merchandise trade of developed countries among themselves and their imports from the less developed countries grew at about the same rate; the exports of developed to less developed countries increased a little more slowly; and the trade of the less developed countries among themselves showed the smallest rise of all.

Table 1.

Summary of Reported Balance of Payments Statements, 1961-661

(In billions of U.S. dollars)

article image

See footnote 1 to Table 4 for description of coverage and area classification.

Service transactions on the whole expanded at about the same pace as merchandise transactions, although the flows among the different country groups showed greater diversity. It seems clear that the greatest increase occurred in the transactions between the developed and less developed countries, especially in the receipts of the less developed group. From the detailed table on services (see Table 2), it may be seen that this relatively faster growth rate was widespread among most individual categories of services.

Table 2.

Reported International Transactions in Services, by Category, 1961-661

(In millions of U.S. dollars)

article image

See footnote 1 to Table 4 for description of coverage and area classification. An analysis by country for 1962-66 of each of the individual items in this table is available in typescript on application to the Balance of Payments Division, International Monetary Fund, 19th and H Streets, N.W., Washington, D.C. 20431 U.S.A.

Credit entries represent total earnings of carriers that are residents of the reporting countries. Debit entries represent the total import freight bill of the reporting countries. The net entries are thus consistent in concept with an f.o.b. valuation of merchandise.

The differing rates of increase in various types of transfer payments and capital are difficult to assess, both because the absolute magnitudes of these flows are rather small, which tends to lend emphasis to quantitatively minor variations in them, and because asymmetries and errors have been found to be large relative to the size of the recorded transactions. (See Table 3.) About the most that can be inferred from the percentage increases for these categories shown in Part 2 of Table 4 is that their average growth during the period was somewhat slower than that in goods and services. Very few of the increases shown, especially for those flows of transfer payments and capital that are significant in absolute amount, are as high as the general range indicated for goods and services.

Table 3.

Reported Capital Flows, Excludino Monetary Gold, 1961-661

(In millions of U.S. dollars)

article image

See footnote 1 to Table 4 for description of coverage and area classification. An analysis by country for 1962-66 of each of the individual items in this table is available in typescript on application to the Balance of Payments Division, International Monetary Fund, 19th and H Streets, N.W., Washington, D.C. 20431 U.S.A.

The entries in this column for “all reporting countries” do not necessarily indicate errors and omissions, except for the grand total. Other items are asymmetrically classified by definition, each country reporting the sector of the domestic creditor or debtor.

II. Balance of Payments Structure

The differences in growth rate for various categories of transaction between 1961 and 1966 were not large enough to produce any striking change in the general pattern of the balance of payments (see Table 4, Part 3). In both years, merchandise trade comprised about three fifths of all international transactions, services close to one fourth, and transfer payments and capital movements the remaining 15 per cent. The faster growth of the current items increased their proportionate share in the total by perhaps 5 per cent (3 percentage points) over the period. While a shift of this magnitude can hardly be seen as an important structural alteration, a continuation of such a tendency over a longer period would result in a noticeably different pattern of world transactions. However, there is no basis for predicting whether this tendency is likely to be a persistent one.

Merchandise trade dominates the international transactions of both the developed and the less developed countries, its relative importance being rather similar for the two groups. However, as mentioned above, Part 3 of Table 4 has been constructed as if all transactions of the less developed countries took place with the developed countries. If an adjustment were made for trade among the less developed countries, the ratios for merchandise trade among the developed countries would be raised in each instance by 1 or 2 percentage points, while those for trade of the developed with the less developed countries would be decreased by as much as 4-6 percentage points. After such an adjustment, it would appear that merchandise trade was somewhat more important, relative to total transactions, in the transactions of the developed countries among themselves than in their transactions with the less developed countries. However, to make such an adjustment for merchandise alone, without similarly allowing for other types of transactions by the less developed countries among themselves, runs the risk of overstating the difference in pattern, or even of creating the appearance of such a difference where none in fact exists.

Table 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 1. Gross Value of Transactions

(In millions of U.S. dollars)

Table 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 2. Increase in Value, 1961-66

(In per cent)

TABLE 4.

Structure of Reported International Transactions, by Category and by Country Group, 1961 AND 19661

Part 3. Ratio of Each Category to Total

(In per cent)

NOTE. Errors and asymmetries in the reported figures, as shown for example in Table 5, are not as important in interpreting gross flows as they are when net balances are being considered. Nevertheless, they are not always negligible relative to the gross transactions, as may be seen by comparing the total recorded receipts and payments in each category (Part 1 of this table). In addition, the method used to divide the transactions of developed countries between those with other developed countries and those with less developed countries might well give rise to substantial errors in that breakdown; it has simply been assumed that the transactions reported by the less developed countries were entirely with the developed countries, and that these identical amounts are included in the figures reported by the developed countries. For these reasons, the percentage increases and ratios derived in Parts 2 and 3, respectively, of this table can be regarded as no more than rough orders of magnitude, and changes and differences in the figures are not likely to have any real significance unless they are substantial and persistent.

The figures cover the transactions of 87 countries and country groups for which statements are published in the Fund’s Balance of Payments Yearbook, Volume 19. Balance of payments statements are available for all those countries classified as developed. Merchandise exports of countries not reporting (other than CMEA countries, mainland China, etc.) are estimated roughly to have been some $5 billion for 1966. Transactions of international organizations and certain international companies are also omitted. The division between developed and less developed countries agrees with the table on world trade in the Fund’s International Financial Statistics.

Including nonmonetary gold.